Traci McCarty - BioMarin Pharmaceutical, Inc. Jean-Jacques Bienaimé - BioMarin Pharmaceutical, Inc. Jeffrey Robert Ajer - BioMarin Pharmaceutical, Inc. Daniel K. Spiegelman - BioMarin Pharmaceutical, Inc. Henry J. Fuchs, M.D. - BioMarin Pharmaceutical, Inc. Robert A. Baffi - BioMarin Pharmaceutical, Inc..

Cory W. Kasimov - JPMorgan Securities LLC Salveen Richter - Goldman Sachs & Co. LLC Joseph P. Schwartz - Leerink Partners LLC Robyn Karnauskas - Citigroup Global Markets, Inc. Christopher J. Raymond - Piper Jaffray & Co. Matthew K. Harrison - Morgan Stanley & Co.

LLC Phil Nadeau - Cowen and Company, LLC Ying Huang - Bank of America Merrill Lynch Ashiq Mubarack - William Blair & Co. LLC Martin Auster - Credit Suisse Securities (USA) LLC Timur Ivannikov - Raymond James & Associates, Inc. Kennen MacKay - RBC Capital Markets LLC Vincent Chen - Sanford C. Bernstein & Co. LLC.

Welcome to the BioMarin Second Quarter 2018 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Vice President of Investor Relations. Please go ahead, Tracy..

Thank you, operator. Thank you, everyone, for joining us today. With me from BioMarin's management team are J.J. Bienaimé, Chairman and Chief Executive Officer; Hank Fuchs, President, Global Research & Development; Dan Spiegelman, EVP and Chief Financial Officer; Jeff Ajer, EVP, Chief Commercial Officer; and Robert Baffi, EVP of Technical Operations.

To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin, including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development.

Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission such as 10-Q, 10-K and 8-K reports.

Now, I'd like to turn the call over to BioMarin's Chairman and Chief Executive Officer, J.J. Bienaimé..

Thank you, Traci. Good afternoon, and thank you for joining us on today's call. So, we delivered another very solid quarter and on track to build on our successes in the first half of the year.

Our accomplishment in May included the approval of Palynziq, a very productive FDA advisory committee meeting of achondroplasia drug development's guidelines and our two-year update on expansion of the valrox program. These accomplishments set us up for significant financial and regulatory achievements over the next six quarters.

With Palynziq now approved in the U.S. and on track for an EU approval in the second half of 2019, we believe we can generate approximately $2 billion in revenues in 2020 with our currently commercialized products alone.

In addition to regulatory and clinical progress, we delivered strong revenues of more than $372 million in the second quarter, a 17% increase over Q2 of last year.

We continue to see strong patient demand for our legacy products and are very pleased with the pace of the commercial launch of Palynziq, and Jeff is going to give you some details on that.

While we expect to incur a GAAP net loss for 2018, we remain on track to deliver a non-GAAP profitability in excess of $100 million for the full year 2018 and total revenues of roughly $1.5 billion.

Having achieved key milestones across the late-stage pipeline while delivering strong financial results, we are pleased with our accomplishments in the first half of the year. And I will turn the call over to Jeff who will review the Commercial Business in more detail.

Jeff?.

Thank you, J.J. I'm extremely pleased with the commercial team's execution in the second quarter of 2018, generating a 17% increase in total BioMarin revenues compared to the same period last year. Before reviewing specific product revenues, I would like to provide some commentary on the Palynziq launch in the U.S. following approval in May. As J.J.

said, the early launch dynamics reflect a high-level of interest from physicians, clinics and patients. All clinical trial patients were being treated with up to 40-milligram dose have been referred to RareConnections, which accounts for a 156-subject from the Phase III study.

More than 50 naïve-to-treatment patients have also been referred, since we received approval. So, our launch expectations are in line with how the Palynziq rollout is performing. These patients are smoothly working through the REMS enrollment process and we are very pleased with that progress so far.

Keep in mind that the transition of clinical trial patients to commercial pace therapy is subject to an end-of-study visit for each patient, the timing of which is variable and subject to scheduling with trial sites.

We anticipate the majority of patients to have completed their end-of-study visit by the end of the third quarter and the vast majority of clinical trial patients to be converted to commercial therapy by year-end. Another important measure of the initial launch is the pace of REMS certification by prescribers.

Already 112 physicians from 55 unique clinics are REMS certified and ready to prescribe, which includes the number of positions at naïve-to-treatment clinics. As we guided during the approval conference call, no revenue was generated in the second quarter as product supply only became available in the first week of July.

We look forward to providing a revenue update on our third quarter financial results call as well as sharing two key launch metrics.

Recall, they include total number of patients on commercial therapy both those in the induction and titration phase and those on maintenance dose, as well as the number of active treating sites defined as having one or more subjects on therapy with Palynziq.

I would now like to turn to second quarter results for our other approved products, all of which contributed to strong revenues in the quarter. We saw growth across the commercial portfolio and want to share a couple key trends behind the numbers.

Despite unpredictable ordering patterns from Latin America, our MPS product, Naglazyme and Vimizim, benefited from new orders from that region quarter-to-quarter. EU/EMEA was also a large contributor to Naglazyme and Vimizim results due to favorable order timing in certain markets.

As a result, Vimizim revenue was $128 million, an increase of 24% compared to the second quarter last year; and Naglazyme delivered $91 million in revenue for the second quarter, a 6% increase compared to the second quarter of last year.

For the remainder of 2018, we remain cautious on Brazil quarter-to-quarter, due to anticipated uneven buying patterns that reaffirm previously provided annual revenue guidance for both MPS brands. Moving now to Brineura for the treatment of CLN2, which was approved in both the U.S. and the EU in 2017.

We're pleased with our efforts to identifying three children early in the course of their diseases are progressing well. We're treating dozens of children globally across 12 markets with many new patients in the quarter from the EU/EMEA region.

We are making progress working through price and reimbursement processes in major EU markets and also gaining name patient approvals in smaller markets. Even with the unique challenges presented by diagnosing and coordinating treatment, we're seeing a steady increase in patients on therapy.

The second quarter contribution from Brineura was $11 million and we are optimistic that it will become an increasing contributor to our total revenues as an important part of our diversified base business. Finally, on to Kuvan. Solid revenue of $109 million in the quarter resulted in 7% growth year-over-year.

Kuvan results were driven by strong growth in North America and continuing development of ex-U.S. markets. Importantly, in North America, we saw 10% growth in commercial patients year-over-year. So, in closing, the company generated strong revenues in the second quarter of 2018 and we look forward to updating you on specific U.S.

commercial launch metrics with Palynziq starting next quarter. Now, I'd like to turn the call over to Dan to provide more details on the financial results in the second quarter.

Dan?.

Thank you, Jeff. Please refer to today's press release summarizing our financial results for full details on the second quarter. Starting with top line results. Total BioMarin revenues for the first half of 2018 were a record $746 million, an increase of 20% year-over-year driven by strong contributions from all of our marketed products. As J.J.

mentioned with our current commercial portfolio alone, we believe we can grow revenues 15% a year and generate approximately $2 billion in revenues in 2020 and then accelerate revenue growth after that based on valrox and/or vosoritide.

In addition to a strong and growing base business, we also have a diversified and therefore relatively secure product mix. To start, no single product is responsible for more than roughly a third of our net product revenues. Moreover, there is a very diverse regional mix of revenue that reduces the reliance on any one territory.

For example, four years ago, the U.S. accounted for 43% of the net product revenues of the products we sell, and this year it's expected to drop to 37%. In addition, Brazil accounted for approximately 14% of those product revenues four years ago, and this year is expected to contribute 5%.

In the future, we expect the regional revenue mix to continue to broaden as we add new markets and more products, essentially building more of a hedge and reducing risk in times where uncertainty or volatility in any one country.

Turning now to particular items of note in the quarter; in June 2018, we received 20 million in milestone payments from Pfizer Inc. triggered by the FDA's and the European Medicines Agency acceptance of Pfizer's submission of an NDA and a Marketing Authorization Application for talazoparib.

The payment is being accounted for as a gain on sale of an intangible asset under operating expenses. Of note, if talazoparib is approved, we would be entitled to up to an additional $40 million in regulatory milestones, a $100 million in sales milestones as well as a mid-single digit royalty on sales. Moving to operating expenses.

R&D expenses increased to $176 million in the second quarter of 2018 compared to $143 million in the second quarter of 2017. This year-over-year increase was primarily due to increased spending on the Phase III programs with valrox and vosoritide as well as spending on the MPS IIIB program.

For the second half of the year, we expect total R&D expenses to be similar to first half levels while accelerating enrollment of additional patients in the global Phase III GENEr8-2 study.

Last quarter, we announced an increase in planned enrollment in this study to 130 patients from the originally planned 40 patients in order to potentially demonstrate superiority on the gold standard annualized bleeding rate endpoint versus on standard of care.

This expanded program has resulted in an increase in our full year R&D guidance to between $680 million and $710 million. So, importantly, we expect to absorb this increased R&D spending while leaving all other guidance, including GAAP and non-GAAP bottom line results unchanged. Turning to bottom line results.

GAAP net loss in the quarter was $17 million as compared to a GAAP net loss of $37 million in the second quarter 2017. The decrease in GAAP net loss year-over-year was due to increased gross profit primarily driven by increased Vimizim and Brineura net product revenues as well as the milestone payment received from Pfizer for talazoparib.

These increases were partially offset by higher R&D expenses. Our non-GAAP income in the second quarter 2018 was $20 million compared to non-GAAP income of $27 million in the second quarter of 2017. As noted, we remain on track for full year non-GAAP income of between $100 million and $140 million.

In terms of cash, cash equivalents and investments, as of June 30, 2018, we had $1.6 billion as compared to $1.8 billion at year-end 2017. Looking forward and as a reminder, we have approximately $375 million of senior subordinated convertible notes, which will mature in October 2018.

As previously promised, we have elected to net settle any conversion of these notes.

What this means is that if BioMarin's VWAP or volume-weighted average price, based on a 25-day observation period, exceeds the conversion price of $94.15, no holders who have surrendered their notes for conversion will receive cash for the principal amount of their notes and also receive shares of BioMarin common stock representing the excess conversion value.

To offset a portion of those dilution from the excess conversion value, BioMarin previously entered into cash call arrangements with counterparty banks at the time the notes were issued in 2013.

Under these cash call agreements at maturity, BioMarin will receive shares of BioMarin stock equal to 50% of the excess conversion shares that we would be issuing. By utilizing net share settlement and our cat call arrangement, the next dilution from settlement of the bonds and maturity will be very small.

For example, if the observation period VWAP is equal to $100, the total net shares issued will be approximately 117,000 shares and at $105 would be approximately 206,000 shares. For more precise information about the convertible note settlements, please refer to the indenture in the first supplemental indenture dated October 15, 2013.

In closing, BioMarin delivered another solid quarter and excellent first half 2018 with strong Vimizim, Naglazyme and Kuvan sales, controlled operating expenses and our continued progress towards increasing non-GAAP profitability this year. Now I would like to turn the call over to Hank.

Hank?.

Thanks, Jeff. Since J.J. has already walked through our key regulatory highlights in the quarter, I'd like to spend a moment on a more recent but equally important development positively impacting our valrox program.

On July 11, the Food and Drug Administration and the Centers for Biological Evaluation and Research issued draft guidance for gene therapy product development. We were very pleased with the scope of this specific guidelines as they pertain to our global valrox program for the treatment of severe hemophilia A.

For the industry, the guidelines eliminated the agency's focus on expediting the development and approval of innovative gene therapy treatments. For BioMarin, specifically we are pleased that the draft guidelines aligned well with the design and development path for our ongoing Phase 3 program.

As a reminder, GENEr8-1 using the 6e13 dose should be fully enrolled by the end of the first quarter of 2019 and GENEr8-2 with the 4e13 dose is expected to be fully enrolled one or two quarters after that. Back to the draft guidelines, just to name a few of the most germane considerations that are already part of our development program.

First, observing patients for six months through a lead-in period in the study to collect data for the annualized bleeding rates; annualized bleeding rates based on retrospective data collection for medical records may be subject to recall bias and missing information; and importantly, this is part of our GENEr8-1 and GENEr8-2 study designs.

Second, sponsors should evaluate discrepancies between one-stage clotting assays and chromogenic substrate assays early in the course of clinical development, prior to considering whether to pursue accelerated approval using factor activity levels as a surrogate endpoint.

BioMarin's view on this point is that we have made tremendous progress understanding and delineating the basis of these findings and we're confident that we can provide the Food and Drug Administration the information they'll need to evaluate valrox's benefit and risk at a time of filing.

Of course, specific details pertaining to our investigations remain proprietary and confidential.

We've reported this discrepancy result between one-stage and chromogenics at previous medical conferences and have published and would remind you that our previous reports indicate that the one-stage result was approximately 60% higher than the chromogenic result.

And as a further reminder, mean one-stage activity at the end of year one, when our pivotal study will be reading out, was approximately 100% in the one-stage assay and 60% in the chromogenic assay still well within the range of normal. Further, other groups have reported such assay discrepancies before.

For example, in the publication by George et al. in the New England Journal of Medicine in December of last year, these authors note that the one-stage assay of factor IX activity is roughly 60% higher than the chromogenic assay results. Tracy can provide a copy of this reference, if you'd like to take this up for yourself.

But importantly, the consideration is that there may be a generalized phenomenon and transgene expression in humans with hemophilia of different types.

Also, we would note that recombinant products have been observed to have discrepant assay results, and so these findings of discrepancies between one stage and chromogenic are by no means unprecedented. And we're well on our way to understanding these in a way that the FDA can make advantage of.

A third point pertains to efficacy endpoints for traditional approvals. Annualized bleeding rate is considered to be the primary endpoint to demonstrate clinical benefit, and this is our clinical endpoint in our program.

In regard to accelerate and prove the agency comments that factor activity may can be considered as a surrogate endpoint for primary efficacy assessment under an accelerated approval client pathways.

And as we've talked about before, factor VIII activity levels are one of our endpoints and while we're aware of the opportunities for early regulatory action this could present and we have plans about this approval pathway, we won't provide specific details in regard to our accelerated approval endpoint strategy for competitive reasons.

However, to support the use of this endpoint, the Food and Drug Administration goes on to say we recommend that you resolve discrepancies and factor activity results from various assay methods targeting factor activity as a surrogate endpoint; and as I said, we are working on this and the FDA goes on to then say determine a factor activity level within the range of factor activity of normal populations.

And clearly, we have demonstrated that we achieve a high level of factor activity representing a very high bar. Taken together BioMarin believes that the draft guidelines for the development of gene therapy products are very supportive of our Valrox study design and approval pathways.

The recommendation for factor activities in the normal reach on an accelerated approval raises the bar for results outside that range and gives us an important competitive advantage. The draft FDA guidelines along with our commercial scale manufacturing capabilities gives us greater confidence in our prospects with Valrox.

We are more encouraged than ever that we've chosen the right path as well as the decision to develop the 6e13 and the 4e13 dose and we look forward to completing enrollment in GENEr8-1 in Q1 2019 followed by GENEr8-2 a quarter or two after that. In addition, we're aligning well with U.S.

health authorities and we're very encouraged by our ongoing conversations and development planning with the EU regulatory parties. Turning briefly to another of our development programs, we're pleased to introduce the International Nonproprietary Name, or INN name, for BMN 250 for the treatment of MPS Type IIIB.

And going forward, we'll refer to that product as tralesinidase alfa when we update you on that program. On that note, we look forward to providing you a few updates from the ongoing study at this year's SSIEM Meeting in early September. So stay tuned. Finally, I want to remind you to mark your calendars for our R&D Day on November 7.

We look forward to sharing an in-depth look at the research capabilities as well as how we're thinking about the future of BioMarin's development pipeline and beyond. We hope you'll attend; the IR team will be setting up Save The Date notices in the near future. Thank you very much for your support, and I will now open it up to questions..

Thank you. Your first question comes from the line of Cory Kasimov from JPMorgan. Your line is open..

Hey. Good afternoon, guys. Thanks for taking my questions. A couple of them probably for Jeff on Palynziq launch. I guess, first of all, I'm wondering how we should think about modeling free drug are discounting for the product over the first few quarters here.

And then the second question I have is, looking at this anecdotally for the roughly 50 naïve-to-treatment patients that have been referred to your RareConnections for Palynziq, do you have a sense yet whether these patients are primarily switching from Kuvan? Or if it's those patients that are in the clinic, but not on drug at this point? Thanks..

Hi, Cory. Thanks a couple of great questions. This is Jeff. I'll try to cover both of them. Starting with the question about free drug modeling, I do want to reinforce that unlike Kuvan, we don't have a starter program and we don't intend to have a starter program for Palynziq.

So, when we have patients starting with their induction dose followed by titrating up to maintenance dosing and a reminder we'll be reporting on those patient numbers for six quarters starting at the end of the third quarter. So, when you see those patients, those patients will all be commercial reimbursed therapy.

The only place that free drug is coming in to play in a material way is for the clinical trial transition patient. So, I already introduced the concept that, we have all of those patients referred into RareConnections or our program. In parallel, those patients are managing through their end of clinical study visits at their clinical trial sites.

Once they get through that gate, they're available for commercially-labeled drug. Through multiple experiences with transitioning patients from clinical trials on to commercial drug, we learned that it's best to do two things in parallel.

First is, to work on getting patients transition on the commercial label drug, and if that's free drug that's fine. In parallel, we work then on getting reimbursement approvals so that we can switch on the reimbursement. So, free drug will really only play a meaningful role for Palynziq in the U.S. in the first several months of launch.

And again, when we're reporting those patient numbers, a quarter from now, those are all be reimbursed patients. And then, relative to your question about the 50-plus naïve patients, I can't resist saying how pleased I am with that rapid uptake of naïve patient enrollments possibly exceeding our expectations at this stage.

There is a mix of patient types in there. They're mainly naïve to therapy. There are a handful of Kuvan switch patients inside there..

Okay. That's helpful. Thank you..

Your next question comes from the line from Salveen Richter from Goldman Sachs. Your line is now open..

Thanks for taking my questions.

With regard to payer coverage decisions on Palynziq, how is step edits with Kuvan being incorporated? And then just secondly, on the Heme A program, could you just give us an update on how enrollment is trending there?.

Okay. So, hi, Salveen. This is Jeff. I'll cover the first question and Hank will jump in on the second one. So, we're starting to see payer coverage policies put in place. And those are a reflection of our kind of national accounts effort getting in front of the major payers with Palynziq presentations.

And so far these payer coverage policies look consistent with our label. A reminder that our label indication is for patients greater than 600-micromolar fee level on existing management. Existing management, of course, would include both diet therapy and Kuvan.

That's solely different than introducing a step edit or requiring a Kuvan failure specifically.

So far, we haven't run into step therapy with Kuvan explicitly in the payer coverage policies or perhaps more importantly, as we're going through the individual patient authorization with payers that hasn't crossed up yet, wouldn't be surprised if it does in minority of cases going forward, but so far no sign of that yet.

And Hank, on the second question?.

Yeah. On enrollment, as you know, Salveen, we don't give specific enrollment updates during the course of the clinical trial. But suffice to say, we're pleased by what we're seeing so far. There's an enormous amount of enthusiasm as you might imagine for treatments that could really so profoundly change the lives of patients.

And we're busy modeling those enthusiasm and getting patients enrolled on our trials..

Thank you..

Your next question comes from the line of Joseph Schwartz from Leerink Partners. Your line is open..

Great. Thanks very much.

I was wondering, just given a current event in the space, how you view the risk of an anomalous DNA fragment entering your production batches based on your processes and procedures for valrox?.

So, Robert, you won't mind answering that question?.

Yes. We followed that recent event very closely. And what I can tell you is that our starting materials are all GMP materials. They have been characterized. They're released by certificate of analysis and specification, and we have a very good understanding of the quality of those starting materials and raw materials.

So, we are vigilant to make sure that as we produce batches of our starting material that they meet those levels specifically, and we have appropriate methodology in place, but I would also mention is that our production system while we have not talked specifically about it, makes very conservative use of those starting materials sort of a working bank, master bank type mode.

And so, we are not routinely going from one batch to batch with our starting material for each production. So, we have experienced with the material generated thus far. They've been used to generate the Phase I, II and III materials that we've been testing all along. We feel very confident in the overall quality of that starting material..

Okay, great. Thanks. And then, I also wanted to ask about your circular DNA hypothesis. And this is probably for Hank.

I know you haven't provided patient level data, but have you seen stabilization in the patients who've been treated for a longer period of time consistent with this hypothesis? And, can you expand on your WFH commentary that the circularization leads to more stable expression.

Is this something that you're able to observe or measure in any way in human hepatocytes or is it just theoretical?.

Hi, Joe. So, can't provide any updates beyond what we provided already at WFH through two years. And there, (31:15) the pattern was, the biggest difference in factor VIII expression occurred, I think, between week 78 and week 91.

Week 104 looked more similar to week 91 than it did to 78, and that gives us a little bit of confidence that we're nearing the plateau phase. The other key piece that gives us confidence about the plateau phase is preclinical studies that show that the settling settles out in about a half of the peak phase.

So, it'll take a while longer to be able to look at individual patients and whether there's individual variation in the settling magnitude or phenomenon. And I'd say, stay tuned for the promised three-year update in the middle of next year as that will be the next time we're reporting activity data.

And as regards assessing for the presence of the stable form of the DNA in humans, as you can imagine that's going to require accessing human tissues, which in this particular case means the liver of patients. And now ordinarily hemophilia patients don't typically undergo liver biopsy because of their bleeding disorder.

That world has now changed and we're in active discussions with investigators to initiate studies of the extent to which there is circularization and whether that does explain variations in factor activity levels. That sub-study is not yet begun, but stay tuned for more information as we work with sites to ask that question.

And then as far as how are we confident that or what is the basis for saying that the stable expression form is in fact the circular form. As we summarized at WFH, there's really an abundant literature about that. That if you look out many years past transgene delivery and a variety of different systems, the only recoverable form of DNA is circular.

And there is no evidence that persistent expression can be mediated particularly in the AAV non-integrating case by forms other than circular forms.

So, taken together and combined with preclinical studies that we've done demonstrating that valrox can in fact make circles can express stably in immunosuppressed animals and can express for good durable period of time in humans.

We believe that the transgene product is taken into liver cells and is now capable of sustainably producing factor VIII message..

Very helpful. Thank you..

Thank you..

Your next question comes from the line of Robyn Karnauskas from Citi. Your line is open..

Hi, guys. Thank you very much for taking the questions. Not to harp on this, but for the PKU just a couple questions like, do you have any sense now like patients who are getting dosed are being dosed (34:28).

So, is it easier to give or more difficult to give than what you thought given the prophylactic or anaphylactic concern? And then on vosoritide, you had this call, I know you wrote in your press release that, this is in line with your expectations of hoping that the FDA post.

Do you think there will be any amendments to this clinical trial and what are your thoughts on this line and what was the big segue from that meeting? Thanks..

Sorry, Robyn, you're breaking up a little bit. It's kind of difficult to understand your question. I think we figured out the first one, which is (35:09) Jeff, which is what's our early experience in terms of probably naïve, I guess you're talking about naïve patients in terms of starting and titrating them. I think we've done as much....

Yes.

Is that indeed the nature of your question, Robyn?.

Yeah. (35:29) are you seeing patients being – having to stay there long. I'm just curious about the whole trend of like doing handful of patients and hearing about the anaphylaxis risk and whether or not that's going more smoothly than what originally we anticipated..

So, based on the number of patients that have gotten all the way through patient referral, reimbursement approval, shipment of first product, scheduling of first visit in the clinic or first injection, which I can say, I can count those on two hands.

The anecdotal reports that I've gotten back from our team that have been in or around those clinic visits has been very positive so far probably not enough of an end to draw any firm conclusions but positive signal so far..

So, your second question I think....

Got it. And the second question was on – yeah, the vosoritide that you have the panel and you wrote in the press release that it's in line with what you expected. Have you had a dialogue with the FDA since the payroll? Anything else regarding the trial that you've designed..

Yeah. So, just to give you a little bit more detail on our take on the panel. The kinds of things that we heard from the panel discussion line up incredibly well with the vosoritide development program. No surprise that. So, just to call out a few things specifically. They want to see randomized placebo controlled trials.

They want to see more than a single clinical trial. And to remind you, we now have ongoing two randomized placebo controlled trials. They want to see trials being conducted in different age groups. So, we have one randomized trial in 5 to 14 year olds and another randomized trial in patients who are under five years of age.

The panel wanted to see average annualized growth velocity as a primary endpoint, we've annualized growth velocity as the primary endpoint. The panel recommended that more contemporaneous data on the current natural history of untreated achondroplasia individuals be evaluated.

They encourage sponsors to collect additional data on other endpoints in achondroplasia. For example, sleep apnea or functional measures. And so, we left that meeting incredibly encouraged that our development program was very much well on track.

And as I said, no surprise, because we have done an enormous amount of work with academics and opinion leaders on that critical elements.

And I have to say that we're also incredibly pleased that the agency referenced on several occasions the data that was published by members of Scientific Committee (38:20) or principal investigators who are studying. So I think that means that we're talking to the right people about the right things.

As regards the one outstanding item of the duration of placebo controlled trials, we noted that there were some discussion at the panel about the duration, but the caveat around that was that durability of effect can be ascertained by measuring what amounts to final height gains in treated patients through adulthood by evaluating long-term treatment in a cohort of patients and that also is very much ongoing.

And the durability question rests on whether there is expected to be any meaningful attrition in the effect, which will obviously be assessed through final adult-type gains.

We believe our preclinical biological data as well as our clinical data as well as our biological marker data all support a thesis that there should be no expectation of attrition of treatment benefit and so we believe a one-year study is a feasible, ethical, responsible approach to establishing the effectiveness of vosoritide over the long-term.

We continue to be in active dialogue with the agency and wherever possible to make sure that we are on the same page. And I think you saw from that advisory committee and as you look at our program, you see we've done a lot of work to establish the page and get everybody on the same page..

And a follow up. Durability same thing that affects approvability. So, it's not like you get approved and there's issues with reimbursement.

Anything that you think you can actually think would be fine with approving under one year follow up, even though you don't have volumes but what is your thought on that? What does that tell you about the feasibility and reimbursability?.

Well, just to remind you, the first 20-something patients that have been treated with vosoritide have now already been treated for 30 months since their last R&D Day, 42 months as of the next R&D Day in a couple of months from now.

And if you just sort of try to line up the timelines of when the readout of the Phase III trial is going to be and imagine when the submission is going to be, well, we haven't given precise timings for all that. We're going to have many years of durability data on that cohort of patients.

And that together with our natural history data, we anticipate we'll be sufficient to establish a durable effect of vosoritide. We're encouraged by the data through month 30. Obviously, stay tuned for months 42, 54, et cetera..

Or the biomarkers....

And the biomarker, as J. J. is reminding me and I didn't take this for granted because we've seen so much of this, it has been such a long time being established that there is no evidence of attenuation of treatment effect.

When you look at the biomarkers, cGMP urinary excretion that stick with cGMP for the biomarkers that's more precisely related to bone which is the, call, ex-bone biomarker. So taken together, we have a lot of biological and human data that indicates that the treatment effect should be maintained.

That together with the data that we would be providing in the NDA the time of submission should substantiate a durable treatment effect of vosoritide..

Great. Thank you..

Your next question comes from the line of Chris Raymond from Piper Jaffray. Your line is open..

Hey, thank you. Just two questions. So, first, for Hank maybe, on the issue of the FDA draft guidance. Especially, you're calling out a target factor activity and that should be in the normal range.

I guess, Hank, this would seem to be a little bit at odds with at least a couple of decades of experience using factor, where normal is not even close to the range of possibilities. Some folks we've talked to have speculated that this targeting guidance, factor targeting guidance might not stand.

Just kind of wondering if you have any insights on that, especially given that this is not recombinant factor, it's obviously gene therapy.

Any thoughts on that? And then on Palynziq, I know it's still early days here, but I think you'd expect hypersensitivity reactions when they do occur to happen, I think, in your clinical experiences like eight weeks or so into the titration phase. Just remind us, I think you saw something like a 15% or 20% dropout rate in the clinical trials.

What would you expect in the real world and what are you guys doing to sort of bend that number down lower? Thanks..

Okay. Hi, Chris. We'll let some clinicians wonder if the agency's guidance for factor-based activity regulatory assessments to not stand. Let me remind you that the context in which they talk about targeting normal factor activity levels is in a context of enabling accelerated approval.

Full approvals, in their language, still need to be based on lead rates.

The motivation behind that from an agency perspective is that to accelerate the approval of something, they want to believe that the treatment effect is robust, reliable, substantial and provides a reasonably likely evidence – they want to measure an endpoint that's reasonably likely to predict clinical benefit.

Now as I said, when you're looking at factor activity levels that are in the lower range and not understanding the biology of what those factor activity assays are telling you, one could imagine that there are situations where a former 5% using recombinant factor replacement therapy doesn't have the same meaning as transgene factor expression.

So, to those clinicians who wonder if that's going to be the sustaining bar or whether the bar is going to be lower, it will take some time to elucidate that as we learn more about the relationship between transgene factor expressions that are under the normal range and bleeding.

So I think it'll be a while before, a long while before that bar could be lowered and it will require fairly substantial sample size investments for companies who are targeting lower factor levels to prove that they have the same clinical efficacy as a product which produces factor efficacy levels in a more normal range.

We like where we are and it'll be a while before anybody can really rationalize a factor VIII activity level based on a lower range of then normal..

So, Chris, I mean, as Hank said, this is a regulatory hurdle. I mean, it's not a clinical one, clinicians obviously can do whatever they want. But it's a regulatory hurdle specifically for accelerated approval..

Got it.

And then on Palynziq?.

Yeah. So, Chris, you kind of quoted what we were telling you on the launch call regarding hypersensitivity reactions and dropout rates through the clinical trial.

And I think the real gist of your question was what are you seeing so far? What can you do about lowering those rates and what do you expect in the real world? The first thing I would point out is we learned a lot with the patients and how to manage through both the induction and titration of patients in the clinical trial.

So, by the time we wound up coming out of the clinical trial, there had been adjustments made to the protocol for that portion of the study. And we had what we thought was a pretty good induction and titration protocol and that's what was printed in the U.S. labeling and we reviewed that with you on the launch call.

Just a reminder that patients started at 2.5 milligrams once a week, they accelerate – and that's for four weeks. They accelerate to twice a week dosing, then they moved to a 10-milligram dose. They do that more frequently, they get to a 10-milligram once-a-day dose and then they transition up to 20 milligrams once a day.

The fastest pace is 10 weeks to get all the way through that process, but our expectation in the real world based on feedback from the clinical trial investigators is that the dose adjustments are managed very carefully and based on tolerability to the patient.

So, I would expect that the induction and titration phase will go deliberately carefully and appropriately slowly for patients to reduce the incidence of hypersensitivity reaction and ultimately to reduce the dropout rate in clinical trial.

Now, how do we expect that in the real world? The first thing that we're doing is beyond the label language that I already mentioned, the first thing that we're doing is, we're really leveraging the experience of the clinical trial investigators.

We've had a number of webinars run by clinical trial investigators who are other PK prescribers that don't have experience with Palynziq through the clinical trials. So, they're guiding on how to use Palynziq, particularly through induction and titration, how to monitor for tolerability to manage through the dosing changes.

In addition, we've had a fair number of clinical trial investigators doing individual speaking events at clinics that are looking to learn how to use Palynziq. Now we follow that up with rigorous training on the use of Palynziq. That would be done by BioMarin team. That's a mix of sales personnel and MSLs on their deeper questions.

So, this is all underway. Too early to tell other than the anecdotal report I mentioned earlier that so far for the naïve patients, very small in, early days, but so far we haven't seen any problems pop-up..

One thing I would add. I think that you have an active REMS program also. One way to absolutely mess up your discontinuation rate would be to have two sites go rogue on induction and titration. And our REMS program puts our eyes on exactly that, so that we don't have any outlying behaviors by physicians.

And just to amplify a little bit on this kind of jump into the call. This is BioMarin's first REMS program, so we've hired a bunch of REMS specialty types of people. They put in place systems that are acceptable for the physicians that are not barriers to them wanting to participate or prescribe.

And we get a lot of data back about performance in this context. So, if anybody's having particular problems, our side of the equation is going to see this very quickly and react very quickly. In the interest of patients, but also in the interest of the commercial business.

So, I think that's going to be a key to also bending down the – as Jeff said, having the good experienced people teach the new people, but then also watching the new people that they follow the track record of the good people and don't have to relearn things that have already been learned..

Great. That's helpful. Thank you..

Your next question comes from the line of Matthew Harrison from Morgan Stanley. Your line is open..

Great. Thanks for taking the question. Hank, probably two for you. So, I know you said you didn't want to talk about details about your potential plans to accelerate hemophilia filing. I guess, maybe, if I could ask the question another way and see if you're willing to comment.

Could you talk about – if you're going to employ an accelerated strategy and if you are, how much earlier you think that could file? It wasn't clear from your comments to me whether or not you're actually going to deploy and accelerate strategy. Thanks..

Well, I think what we can say is, everybody can recognize the virtue and value of getting valrox in the market as quickly as humanly possible.

And I think you can read for yourself, the FDA's guidance document and assess for yourself whether it's likely that BioMarin can pull together the relevant information to support an accelerated approval strategy. And we've been fairly transparent about our findings.

For example, we were talking about one-stage clotting and chromogenic substrate assay discrepancies more than a year ago, more than a year in advance of the FDA issuing these kind of documents. This is not just not news to us, I think, you could say we are key drivers of these being the considerations.

We want to stop short of talking about issues related to timing and scope and methodology, because as I said on a number of occasions, this is highly proprietary confidential information. It's an enormously valuable and competitive market.

Our shareholders have invested a lot of capital in making sure that we get the maximum benefit for our patients in our enterprise for them and we are duty-bound to protect that interest. And so, just stay tuned for more..

But at the same time, obviously, these guidelines do offer a new opportunity here that we are seriously considering as I gave (53:06)..

That's very helpful. Thank you. And then, can I just ask a follow up.

Just maybe on your other gene therapy programs, as we think about time, I guess, in terms of initial datasets from some of those, I mean, how many patients do you think you need from some of those initial programs to maybe see a signal specifically may be for your, I'll call, next-generation pegval program?.

That's good. Next generation phenylalanine hydroxylase. Just to remind you that pegvaliase is a substitution that's done in naturally occurring human enzyme. And the cool thing about this is, we would love to deliver the end-to-end, the missing human enzyme, but it really would have required an enormous amount of sacrouterine for it to work.

So, the ability to pull the PAH gene in the liver is really the central advantage of the gene therapy approach. It's a little too early to talk about patient numbers, but what I can tell you is the FDA has approved on more than one occasion in the intervention whose primary benefit is to lower blood phenylalanine levels.

And I speak here specifically of BioMarin's Kuvan and BioMarin's pegvaliase. Second thing is that the effects of blood phenylalanine levels that we've observed for example with drugs like pegvaliase are quite substantial. So that it doesn't require an enormous amount of sample size to definitively prove a reduction in blood Phe levels.

And the third thing I would mention is that we got great, great efficacy data of our PKU gene therapy in preclinical models of the disease. Models that we've run with Kuvan and pegvaliase know quite well. Come to R&D Day, and we're going to talk a lot about the data that we've generated so far.

And I think that'll give you a little bit more insight into what the development path could be.

I think what you can tell from the hemophilia gene therapy guidance document BioMarin is an active and energetic contributor on a proactive way to how the FDA thinks about introducing innovative therapies, and I can assure you that we will put ourselves in a similar position with PAH gene therapy (55:30)..

Yeah. And also maybe Robert, you should add a few things about also the fact that on the manufacturing front and this time we're planning to start a PKU gene therapy program basically with our Novato facility here in California.

So, this is the plan that will be – so we start to see in the first, – the first-in-human should be with potentially commercial scale, the one I'll guaranty it as a potentially commercial scale product.

Do you want to the few words to that, Robert?.

Yes. Thanks J.J.

One of the great advantages of having built our own manufacturing capability and demonstrated that in the production of valrox earlier this year material that is currently supporting the Phase III study that Hank has alluded to, it gives us a tremendous knowledge base to leverage platform technology for production of other products specifically for gene therapy of a PKU product.

What that allows us to do is to, in this case and that is our plan at this point, is to produce the initial clinical material using what we would anticipate to be the commercial scale production in the commercial facility. That simplifies the manufacturing production quite a bit because we can leverage the experience we have with valrox.

It aligns very well with what Hank has talked about and that seeing a profound potential clinical benefit early on will be not encumbered by having to transition manufacturing or scale up manufacturing somewhere else.

The upside of all of that is, I think, this program like many other programs at BioMarin has the potential for a very rapid clinical development going hand in hand with the manufacturing development to produce material to support pivotal studies as well as the commercial launch..

Great. Thank you very much..

Your next question comes from the line of Phil Nadeau from Cowen. Your line is open..

Good afternoon. Thanks for taking my questions. One, commercial and then one follow-up for Hank.

On the commercial side, Jeff, can you talk a little bit about how the patient treatment naïve patients, the non-clinical trial patients that have been recommended for therapy with Palynziq? Where they're coming from? Are they coming predominantly from clinical trial centers, or are there new treatment naïve physicians, for the lack of a better term, who are prescribing? Then second Hank, for you, on hemophilia, I'm curious to get your thoughts on your commitment to filing both the 6e13 and 4e13 doses at the same time.

Just seemed like 4e13 could be six months behind and given the design of the single arm study with the factor levels not actually quite getting up to normal at least on the factor levels that it doesn't seem to fit as well as with the new guidance document.

So, is it possible that you file 6e13 first and figure out what to do with 4e13 later? Thanks..

Yeah. So, Phil, this is Jeff. I'll cover the first question, which is for Palynziq in the naïve patient referrals where they're coming from. Just to reinforce a little background, we now have greater than 100 prescribers at 55 PKU clinics that are through the REMS certification process and able to prescribe Palynziq.

That includes, let's say, majority of the 32 clinical trial sites. Some from the other first targeted 30 large PKU clinics that are naïve to treatment experience, and a handful of clinics that are in that kind of broader group of 125 total PKU clinics. But by the time you get past the first 62, you're starting to get into some smaller clinics.

Most of the naïve patients are coming from the clinical trial sites, some from the other larger PKU clinics that have not participated in the clinical trial and at least a few patients from that other larger group of smaller PKU clinics. That's the experience so far..

On your second question, Phil, I think it's a reasonable assumption to make that we're going to file quickly after getting what we believe will be registration enabling data for the first dose group that crosses the finish line.

Based on the comments that I gave, the 4e group enrollment is, even though it's a study that's approximately three-fold smaller, we still fully expect the 60 dose study to enroll much faster. The interest level in the 60 dose group is extremely high.

And so, unless some major dynamic were to shift, I would anticipate that 60 will be ready to be filed well in advance of 40. And therefore, wouldn't hold us availability of valrox in general, waiting for the second study..

Thanks, guys. Thank you..

In the interest of time....

And, let me add. You made a good comment that 40 might not quite high with the new guidelines for accelerated filing, because it's potentially a little below the 50%. And that would also apply to our competitors..

In the interest of time, we ask that you limit yourself to one question. Your next question comes from the line of Ying Huang from Merrill Lynch. Your line is open..

Hi. Thanks for taking my question. Just one on the hemophilia program. Hank, I think, I heard you saying that the next update from the patients in the Phase I, II study for valrox would be at maybe sometime next year.

So, does that mean you're not talking about this at your November 7 R&D Day? Or we won't get any clinical update at ASH? And why is that?.

So, yes, that's what it means. And why because we're now moving into a more chronic phase of gene expression. And the issue really is durability and that's really going to be decided by clinical outcome. As I mentioned, it's not crystal clear what factor activity level translates to what reduction of bleeding in using the transgene.

That's why we want to get it as high as possible. Take that question out of the equation. But in X years from now, and I don't know when the X is, and it may not be the same for every patient. We may start to learn about what the relationship between lower factor activity levels and breakthrough bleeding events are. As J.J.

just pointed out, part of the reason that lower factor activity level studies, including our own 4e13, are not going to be eligible for accelerated approvals, because of the uncertainty about what lower factor activity levels mean for bleeding.

So, what we want to do is we want to observe bleeding frequency and relate that back to factor activity levels, not the other way around. That's the principal reason for running the experiment the way that we're running, the experiment and reporting the data that we're reporting it..

Okay. Thanks, Hank..

Yeah..

Your next question comes of the line of Tim Lugo from William Blair. Your line is open..

Hi, guys. This is Ashiq Mubarack on for Tim. Thanks for taking my question. So, to follow-up on the last question.

As you continue to look at long-term valrox durability, if factor VIII activity continues to contract kind of moving forward, at what point would you consider a multiple dose strategy? And would you reconsider your dosing levels? And in that scenario, how would you be limited by your manufacturing capacity? Thanks..

Well, subject of re-dosing is important not so much driven by potential contraction because the data that's been collected in factor IX hemophilia in humans, hemophilia in dogs does indicate that once you get transgene in there, it stays in there.

If you will have talked about liver delusional effects, and we don't really see that as being adult phenomena but it is an important pediatric phenomena. And that's where re-dosing could become really important. And so for that reason, we are keen to develop some concepts around re-dosing, but that's for us is a bit down the road.

And I don't want to really concrete thoughts to pass along about what you'll see and when you'll see it just yet because we're really most focused on running our Phase III program and getting to registration.

And I should remind you, I should have said this when Ying gave us in the previous question that it's not just that you're not going to see the factor VIII data from either the Phase I/II study in the integral time points or from GENEr8-1 and GENEr8-2. We're in lockdown mode, and so none of us see the data either.

It's really important point as it pertains to study integrity and protecting the interpretation of the results. I hope you all understand and bear with us as we go through this phase of our program. We are keen to know too but we need to run an experiment in a high quality way. This is going to be a landmark study of its kind.

It's going to change medical practice. These data must be high quality..

Okay. That makes sense. And just quickly on the FDA draft guidance. Did you hear anything or see anything of interest related to your potential PKU studies, and are there anything that kind of made you reconsider how you might design those studies moving forward? Thanks..

Not particularly. Like I said, I mean, it's a gene therapy for hemophilia guidance and the rare disease guidance is whatnot. For a company like BioMarin, this has been our living for 20-something years, expediting the availability of drugs for patients with terrible rare diseases.

So, honestly, I feel like we see our language in these guidance documents is the real answer. So, I suspect as we get closer to the development strategy and whatnot we'll be working closely with the agency to identify the most fertile path.

And as I said, it won't surprise me if we see more and more proclamations coming out that look a lot like BioMarin's programs..

Your next question comes from the line of Marty Auster from Credit Suisse. Your line is open..

Hey, guys. Thanks for taking my question. Probably going to be obsolete in a few years as you develop gene therapy, but curious if post U.S. approval of Palynziq, if you got any update or comments on the conversations with European regulators.

And then curious for Jeff, is Palynziq's efficacy enough to kind of create very meaningfully different value proposition ex-U.S. Obviously, Kuvan has been kind of a majority in values, but I'm curious Palynziq will have a larger proportion of its value kind of recognized globally. Thanks..

On the regulatory process what I can say is, we publicly communicated when we filed. And if you're familiar with the European regulatory process, you know there's a critical milestone about four months after a submission. And we're pouring over the review comments that we've seen to-date. I would say that we're not done on the one side.

On the other hand, we are very optimistic that as we got through the FDA, so too shall we get through the EMA. As we got to the FDA and got first cycle of approval, we are optimistic that we will get through the EMA in a first cycle approval.

Now, in the future, if I use the term cautiously optimistic, please don't over interpret that, because we're in the middle of the process here. Our expectation and belief is that we'll be able to bring Palynziq European patients through an approved MAA, I think we're seeing second half of 2019.

So, nothing to report that worries us that we're not going to be on that timeline. And with respect to value proposition for Palynziq, ex-U.S. that's a big subject could talk about it for a long time. But I think what you're pointing out is the environment ex-U.S. is substantially different than where we're currently launching Palynziq in the U.S.

For BioMarin's portfolio, the U.S.

market is the best and most receptive market in terms of a payer environment on the one hand, and it's also where we spent over a decade developing the PKU market with both payers, prescribers and professional associations taking a pretty important stake in how PKU is treated that too and including using therapeutic intervention. So, U.S. is the best.

As it relates to Europe and other markets, it's been great for the last 2.5 years. So, we've recovered rights to both Kuvan and Palynziq. I can tell you that we've used that 2.5-year period to develop how other markets are thinking about PKU both prescribers, patients and payers.

It's notable that the EU treatment guidelines were published after BioMarin recovered rights to the PKU franchise. And also worth noting that the European systems tend to have more developed and specific programs that you need to go through for price and reimbursement approvals.

So, we are working hard to prepare – different systems behave differently. So, UK has an incremental cost effectiveness program. France assesses value based on innovation and a degree of clinical response for example. So, there're different systems and we are working to develop our strategies for each of the major EU systems.

But fundamentally, Palynziq has a really powerful value proposition. It's rooted in the burden of illness and remaining unmet need for adult PKU patients. And the second piece is the profound reduction of phenylalanine.

So, we're moving from a world in Kuvan in which we seek to impact phenylalanine levels based on response to the world for adults with Palynziq but we're really moving towards phenylalanine control and that's the power of Palynziq..

Thanks for providing such a detailed response. Appreciate it..

Your next question comes from the line of Laura Chico from Raymond James. Your line is open..

Yes. Hi. This is actually Timur Ivannikov for Laura today. And we have another question about valrox. How should we be thinking about the minimum level of duration for valrox? We don't know if you've had payer discussions. And based on your market assumptions, what do you think is the minimum durability of valrox treatments? Thank you..

So, what you're saying is related to payers, specifically to payers?.

Not necessarily specifically to payers but maybe about your market assumptions in general, what would be a feasible minimum duration of this treatment?.

Well, I mean, I think payers are at the end of the line. It starts with what kind of durability are you seeing out of your clinical development program. It next moves to what kind of durability will regulators require. And then, finally, what are the expectations around durability from payers.

The payers are saying, look, we'll pay based on an expectation of durability, which will be built into an eventual price bag.

So, I'm not suggesting that's what happened, but if you went to a payer system and you said that our gene therapy will last for exactly 36 months at 100% and after that it'll go down to 0%, payers will be able to say, fine, and we'll negotiate a price based on an expectation of 36 months of response. But I think, Hank....

I mean, in another way to explain that, because we are doing a lot of payer research. And to expect that it actually, no payer has actually said something related to, well, if your product doesn't work more than x months or x years, we're not interested in covering it. Nobody ever came up with that.

At the same time, I think we have communicated in the past that, in respect to your – as Hank said, by the time we get approval, we're probably going to have four to five years of historical data on several patients.

And so, we'll be able to document whether we – and by the way, the factors will be mainly demonstrated here by bleeding rates not by factor VIII, but assuming you still have no bleedings after four to five years, we'll have visibility on that at the time of launch.

We have seen, also based on early payer research, that it might be difficult anyway to potentially base the reimbursement negotiations on more than five years of value of the current treatment. So that's another way to kind of answer your question, although it's not really to express that there is a minimum. And so, we have a minimum expense so far..

And if there was a regulatory or clinical components to the question, I think the thing I'd say about that is, we presented our two-year data to a major health authority.

One of the striking comments that one of the health authorities made to us was something, at the two-year mark, was something like, hmmm, no breakthrough bleeding, all target joints resolved, give me some of that from the hemophilia patient..

Thank you very much. Very helpful..

Your next question comes from the line of Kennen MacKay from RBC Capital Markets. Your line is open..

Thanks so much for squeezing me in here. I was wondering with the recent approvals of Brineura and pegvaliase, there was any chance at some point you could help with longer term guidance sort of beyond the Kuvan 2020 initial stage Brineura patient, caveating, obviously, that there are some moving parts with sort of vosoritide and valrox.

And if not, sort of, maybe when we could see that and/or what the moving parts are to sort of preventing that? Thank you very much..

Yeah. I'll start and probably Dan can step in. But, first of all, we generally give one year guidance when we report to Q4 in the previous. You saw during the first quarter of the actual year, we will continue to do that. Actually today, we are giving a bit more long-term guidance in terms of revenues.

As we said, we anticipate that our currency commercialized products will generate around $2 billion of revenue by 2020. So that's some beginning of long-term guidance. Dan talked about – so just a reminder that the potential generic introduction for Kuvan is in Q4 of 2020 is only in the U.S. market, x-U.S. we are projecting until 2024.

Dan?.

Yeah. I don't think I have a lot to add to that at the moment. When your guidance is the guidance we feel most comfortable and appropriate, we will think about others down the road. But don't anticipate doing it at the moment..

Thank you..

Your next question comes from the line of Gena Wang from Barclays. Your line is open..

Hey. This is (01:17:26) on for Gena. Just a couple of very quick questions, since most of the questions are already asked.

Number one on your trial for the patients with AAV5 antibodies, could you give any additional color on where that is? And number two is, if you could give any additional color on what kind of data, how many patients are we going to see for the MPS asset at the SSIEM?.

Yeah. For the study in AAV5 positive patients also known as the 203 study, is under way, but it is a slow study. It's slow because we are treating patients who have the weakest titer first followed by patients who have stronger titers and then stronger titers yet.

And we also want to measure factor activity level for several weeks before treating subsequent patients. And this is designed so that in the event the preexisting immunity does affect transgene expression in a complete way that we don't expose a lot of patients to valrox, when there is no chance for it to work. So, 203 is a slow study.

And all I can say is, we started not really give you an enrollment update or a timeline for completion anticipation. And SSIEM, we have enrolled a full natural history cohort just to remind MPS IIIB. Just to remind you the study has a run in period essentially of a year that's the part that we are fully enrolled, and after that year of observation.

So that completed in April of 2018. A year of observation will complete at 2019, at which time all patients will roll over to the active drug and be treated for a year. So, it's April of 2020, roughly 20 patients who have been treated for a year, they'll have a year of their own natural untreated in a year of treated data.

Therefore at SSIEM, we're still relatively in the early side of all of that having just completed enrollment in the run-in study.

When we reported on three, I think, patients at the World Congress in January of this year, we reported on three patients, complete normalization of heparan sulfate levels, normalization of organ size, some signs of stabilization of brain cognitive function.

We'll update that with a few more patients, but we're not really in a position to be definite about the direction that tralesinidase is heading. So, hope to see you at the conference and we can talk about the data..

Got it. Thanks so much..

Your next question comes from the line of Vincent Chen from Bernstein. Your line is open..

Thank you very much for taking the questions. A couple of quick ones on valrox, one on manufacturing one on the development path forward.

So, on manufacturing were all the patients in the initial 6e13 group treated with the same valrox vector? I don't mean just one manufacturing run, but one vat of valrox made potentially in multiple runs and mixed together prior to dosing, or did different patients get products from different manufacturing run?.

Robert, you want to answer that?.

Yeah. So, we've produced a number of different runs and patients have been treated with different production batches both from our initial clinical process, which was the genesis of the Phase I/II results we've presented in May. And we have produced several batches of materials that will be used throughout the Phase III clinical trial.

So that we will have, at the end of the day, clinical experience with a number of different batches made by different production processes and scales and facilities, and our analytical characterization gives us a strong sense of the comparability of that material.

And so, we will not be basing our entire clinical outcome on the production of few batches to be a significant number of batches produced and patients treated with that material..

I see. And then could you provide additional color on the data supporting your plan to move into a trial treating hemophilia A patients with pre-existing antibodies.

So, what data would support that? And I guess, what are the implications that this data would have on the ability to re-dose gene therapies?.

We presented at ASH last year poster, I think, it was on the treatment of non-human primates who have demonstrable titers of antibodies to AAV5. And we showed that there is an attenuation of transgene expression in patients with pre-existing humoral immunity to AAV5, but not a complete and total elimination of transgene activity.

And so that's the scientific basis. And underneath that the concept is that we're presenting a massive amount of vector and capsid protein to a swappable immune system and the idea is to break past the defense of the immune system to get the gene in the liver. And so that's the scientific basis. And the second part of the question, remind me....

What will be the implications of this data with opportunities like re-dose?.

So, at one level, one implication could be valrox for everybody. At another level, it could be that there is a requirement for companion diagnostic to identify patients in doing the benefit risk of valrox is not the same. And, for example, AAV5 positive patients versus AAV not naïve patients.

In the event that a companion diagnostic is required for development, we're well underway in that regard.

We've already contemplated the possibility that that two of your study may not work, in which case we would have to have companion diagnostics by FDA guidance accountable kind of registration and we're well on our way towards having that as a backup if we needed..

All right. Thank you very much for taking the questions, and congrats again..

Yeah..

There are no further questions at this time. I'll turn the call back over to CEO and Chairman, Mr. J.J. Bienaimé..

Thank you, operator. Thank you all for participating in our call today. So, to conclude, we believe we delivered another very solid quarter, and we are on track to reach approximately $1.5 billion in full year revenue in 2018. We remain on track. For full year, non-GAAP income between $100 million and $140 million.

And with Palynziq now approved in the U.S. and on track for an EU approval in the second half of next year, we believe we can generate approximately $2 billion in revenues in 2020. And that's a little bit of long-term guidance. We currently commercialized products only. And we look forward to providing you an update on specific metrics on the U.S.

commercial launch of Palynziq in the third quarter and also at R&D Day a few weeks after that. So, thank you for your continued support and goodbye..

This concludes today's conference call. You may now disconnect..